Chamber of Digital Commerce Report, Reviewed

On July 30, the Chamber of Digital Commerce Token Alliance published a 108-page collaborative report of proposed guidelines for the "Responsible growth" of the cryptocurrency market.

At this point, the CDC is comprised of approximately 350 participants - ranging from technologists and economists, to token experts, lawyers, former regulators and membership companies as large as Microsoft, Deloitte and IBM. Tokens are not necessarily 'securities' or 'commodities' and therefore fall into a grey zone The CDC report is dubbed "Understanding Digital Tokens." It is the first installment of what is supposed to become a series, and it focuses upon a particular type of coin - tokens that are not designed to represent securities or commodities, meaning that they should be situated in a grey zone not controlled by the SEC and U.S. Commodity Futures Trading Commission respectively.

In every reviewed case, a specific regulatory framework for generation and distribution of digital tokens is absent.

Token's white paper: Dos and don'ts Based on the assumption that digital tokens "Can take a variety of forms and serve many purposes" that was supported by the aforementioned examples, the paper then attempts to outline principles and guidelines for 'Token Sponsors' - defined as an individual or group that either "Generates or distributes" or "Undertakes to lead or control the development, adoption, or distribution of a digital token" - to manage the risk that the offering and distribution of a digital token may entail, considering certain securities and commodity laws.

The CDC suggests risk management based on the broad definition of what might be deemed as "Securities" along with the Howey Test, as well as stating the cases in which the CFTC may exercise general anti-fraud and anti-manipulation authority over any digital token.

"If a Token Sponsor's digital token will be distributed in private sales, a limited public sale or auction, airdrop or a similarly limited event, it may be more appropriate to describe the event in separate materials that can be superseded when the event is completed, rather than in the Token Sponsor's white paper."

The CDC stresses that following these guidelines "Provides no guarantee that a federal or state regulator will not take issue with the digital token issuance, sale or other distribution" as they are intended to assist a Token Sponsor when thinking through critical issues related to "Its digital token issuance, sale and distribution."

Further, the Chamber report focuses on token trading platforms, "Entities that allow the trading of digital tokens." The paper first warns that "Responsible" platforms "Should do more than merely avoid regulation by the SEC or the CFTC":. "They should voluntarily conduct business in a manner that protects token consumers, protects the integrity of secondary markets and builds public confidence in the broader blockchain industry."

The section discusses how token trading platforms may manage risks that arise when a regulator or a court contends that a digital token trading on their platform is a security or a CFTC-regulated instrument "Notwithstanding the Token Sponsor's claims to the contrary." Essentially, the report suggests the platform to do due diligence, keep the Howey Test in mind and review the token's present utility before listing it on their service.

CDC will continue publishing reports to improve the token ecosystem The report comes to a close by noting that the "Concept of digital tokens is complex" and by citing SEC Commissioner Hester Peirce, who declared that she "Used to know what a token was," while its present state is much more perplexing - which, in turn, shouldn't "Breed anxiety and therefore bad regulation."